Merkel relents on minimum wage demand in coalition talks

21st November 2013, 0 comments

Germany is set to introduce a national minimum wage, Chancellor Angela Merkel said Thursday, giving in to a core demand of the centre-left party with which she hopes to form a coalition government this year.

The concession was cheered by France, which has, along with the United States and the IMF, urged Europe's biggest economy to boost domestic demand and restore the lopsided trade balance of the export powerhouse.

"This is a signal ... of an approach that may be more cooperative within European economic policies," said French Finance Minister Pierre Moscovici, reiterating the need for a eurozone "rebalancing".

Merkel -- who has argued that a minimum wage will hurt businesses and force them to lay off workers -- said she would have to give in on the issue in the as part of the give and take in the ongoing coalition talks with the Social Democratic Party (SPD).

"The Social Democrats will not conclude negotiations without a universal legal minimum wage," she told a Berlin business forum.

Merkel said she and her Christian Democratic Union (CDU) would "try everything to prevent the loss of jobs through this measure" and also insisted that in return her party would insist on its own red-line demand of no tax rises.

She argued that fiscal discipline and balanced budgets help maintain investor confidence and global competitiveness and added that "Europe's problem is that we've promised almost everything so far and have kept very little of it".

Merkel won September 22 elections but fell narrowly short of a governing majority, forcing her CDU and its Bavarian partners the CSU to enter into tough coalition talks with the SPD, which both sides aim to conclude next week.

Fixed minimum wage 'ruined' E. Germany

In the talks, SPD chief Sigmar Gabriel, Merkel's likely future vice chancellor, has insisted on the introduction of a nationwide minimum wage of 8.50 euros ($11.40) per hour to help Germany's growing army of working poor.

Germany's has a jobless rate of just 6.9 percent. But, according to the DIW economic institute, 5.6 million Germans, or 17 percent of the workforce, now earn less than 8.50 euros an hour, especially low-skilled and part-time workers.

The SPD has promised to put any coalition deal up for a vote to its sceptical party base, many of whom do not want their blue-collar party to govern in Merkel's shadow, but whose consent would be needed.

Merkel's party favours separate pay deals by industrial sector and region, arguing that a national minimum wage would harm many small and medium-sized businesses and could force them to lay off workers.

"The fixed minimum wage ruined East Germany," charged the conservative state premier of eastern Saxony-Anhalt, Reiner Haseloff, referring to the former communist government. "We must not make the same mistake."

The new president of the BDA employers' association, Ingo Kramer, said that while 'poverty wages' are "unacceptable", in some cases "there are good reasons" for low hourly wages.

Currently a patchwork of pay deals has set minimum wages for a dozen industrial and service sectors, including cleaners, electricians and security guards.

Minimum wage levels are often higher in western states than in the economically weaker states of the former East. Caregivers, for example, earn nine euros an hour in western states but only eight euros in the east.

Merkel, in her comments to the forum organised by Munich newspaper Sueddeutsche Zeitung, urged compromises on both sides to forge a coalition government before Christmas.

"I too will have to consent to measures which I do not innately agree with," she said, mentioning the minimum wage as an example.

She said a grand coalition was "not the heart's desire of politicians" but had resulted from the election outcome.

"The voters have neither given an absolute majority to the business wing of the CDU, nor the left wing of the SPD. Only both of us together will have the ability to govern."